OK. It’s May. You came into the year with budget and revenue goals. It’s no longer early in the year. What if you are falling behind? What can you do to make the numbers look better? Well, one approach is to study and implement smart energy efficiency projects. Smart, well-thought-out ones can have a ROI of 20, 30, 40, 50, even more % per year, better than so many others.
Energy conservation is a low hanging fruit for reducing operating costs, especially in this era of high inflation, led by energy costs. Think of energy efficiency as a financial investment. What is a sound investment? You spend money upfront for something that will save you costs or make you money for many years to come. You get a robust return on this investment with low risk. This perfectly describes smart energy efficiency projects. For a well-thought-out project, the risk (of failure) is low. You replace a 60-watt light with a 20-watt LED, you will save 40 watts of electricity; no doubt about it. You replace a cooling unit with an efficiency rating of 9 with one of 13.5, your efficiency goes up 50%; no doubt about it.
There is a particular value of smart energy projects. If you spend money upfront for the lights, cooling units, etc. and you save, in total, $100,000 per year in avoided energy costs, that’s good. But the changes made in year 0 continue year after year (it’s not like you’ll put back in the old light bulbs or AC units after that first year, right?). So you will save $100,000 the next year and the year after and the one after that without having to do anything more – for the entire life of the equipment. And then it gets better than that. Your $100,000 per year savings is based on a certain reduction in energy usage times its cost rate. Energy rates are, of course, only going upward, especially in this last year. Assuming an average of 3.5% per year rise in energy costs (about what it has been for the last decade, but lower than this past year), then the $100,000 you saved in year 1 automatically becomes $103,500 in year 2 – again, without doing anything. And it becomes $107,000 in savings in year 3 and $110,000 or so in year 4, etc. All from the one set of upgrades you made in year 0. Compare that to sales. Given an average profit of 10%, one would have to sell an additional $1 million of widgets to get your $100,000 per year of gain. Even if you were successful in doing this, then you have to go right back out there and do the same thing (sales, manufacturing, transport, etc.) again the next year and sell more in future years ($1,035,000 in sales in year 1, $1,070,000 in year 2, etc.) to equal the gains of smart energy efficiency.
And smart energy efficiency projects result in other palpable direct financial benefits. Such projects usually result in lower O&M efforts and costs. For example, an LED light lasts much longer than a standard fluorescent (8-10 years vs. 2), saving not only maintenance efforts of replacing lights, but allowing your staff to concentrate on bigger picture items and being distracted much less rarely, satisfying tenants. Fewer LEDs needed to be around as backup frees up space, too, and free space is valuable. Using less gas, oil, etc. on equipment because of energy efficiency means the equipment lasts longer, reducing your long-term high capital expenditures.
And one more thing. OK, for some energy efficiency projects a lot of money may need to be spent upfront for that very useful technology. Well, because of the low risk and relatively high returns of such projects, money can be borrowed for such projects at very competitive rates. Lenders know energy projects are low risk and the borrowers will get financial benefit (compared to other projects), so they’re willing to compete for such loans – to your benefit!
So you can see that smart energy efficiency is one of the best financial investments a business can make, and can make your bottom line numbers look better in this and future years.
CCES has the experts to assess opportunities at your facilities for energy efficiency, recommend ones with the greatest potential, and act as your project manager to bring in vetted, experienced vendors and specialists to bid and implement the project and ensure that you get the savings promised. Contact us today at karell@CCESworld.com or at 914-584-6720.